What is EMI?
EMI (Equated Monthly Installment) is the fixed monthly amount you pay to the bank or lender. It includes both the principal (the amount borrowed) and the interest (the cost of borrowing).
Formula used for EMI calculation: EMI=P×R×(1+R)N(1+R)N−1EMI = \frac{P \times R \times (1+R)^N}{(1+R)^N-1}EMI=(1+R)N−1P×R×(1+R)N
Where:
- P = Loan amount (₹10,00,000 in this case)
- R = Monthly interest rate (Annual Rate ÷ 12 ÷ 100)
- N = Loan tenure in months (7 years = 84 months)
Factors Affecting EMI on a ₹10 Lakh Personal Loan
- Interest Rate (Most Important)
- Interest rates for personal loans usually range between 10%–16% p.a.
- A higher rate means a higher EMI and more total interest paid.
- Loan Tenure
- A longer tenure (7 years) reduces your monthly EMI but increases the total interest paid over the loan period.
- A shorter tenure (3–5 years) means higher EMI but less overall interest.
- Credit Score (CIBIL Score)
- A score of 750+ can help you get lower interest rates.
- A poor credit score may increase your interest rate.
- Lender’s Policies
- Different banks and NBFCs have varying charges, processing fees, and repayment flexibility.
EMI Breakdown for a ₹10 Lakh Loan Over 7 Years
Instead of giving a fixed number (since rates vary), let’s look at an estimated range:
- At 10% interest rate, EMI ≈ ₹16,600 per month
- At 12% interest rate, EMI ≈ ₹17,700 per month
- At 14% interest rate, EMI ≈ ₹18,900 per month
Your EMI will depend on the exact interest rate offered by your lender.
Benefits of Choosing a 7-Year Tenure
Lower Monthly Burden: EMIs are more manageable.
Flexibility: Easier on salaried individuals and families managing multiple expenses.
Financial Planning: Allows better cash flow management without over-stressing monthly budgets.
Downsides of a Longer Tenure
Higher Total Interest Paid: The longer you take to repay, the more you pay in total.
Debt for Longer Period: Being under debt for 7 years may affect future loan eligibility.
Smart Tips to Manage Your Personal Loan EMI
- Compare Lenders Before Applying – Check banks, NBFCs, and online lenders.
- Use a Personal Loan EMI Calculator – Free tools online can show exact EMIs.
- Prepayment and Part-Payment – Reduce loan burden by paying extra when possible.
- Improve Your Credit Score – Helps secure lower interest rates.
- Choose the Right Tenure – Balance between affordable EMI and total interest cost.
(FAQs)
Q1. How is EMI calculated for a ₹10 lakh loan?
EMI is calculated using the loan amount, interest rate, and tenure. Online calculators make this process simple.
Q2. Is a 7-year tenure good for a personal loan?
Yes, if you want lower EMIs. However, the total interest paid will be higher compared to shorter tenures.
Q3. Can I reduce my EMI after taking the loan?
Yes, through balance transfer to another lender at a lower rate, or by making prepayments.
Q4. What is the minimum EMI for a ₹10 lakh loan?
It depends on the lowest interest rate available in the market. With a 7-year tenure, it may be around ₹16,000–₹19,000 per month.
Q5. Does credit score affect EMI?
Yes. A higher credit score ensures better interest rates, which directly lowers EMI.
Disclaimer: This article is for general information only. The interest rates and terms mentioned in it depend on the policies of the bank and NBFC. These may change from time to time. Before taking any type of loan, get complete information from your bank.